How is Property Divided During a Texas Divorce?

The State of Texas is a community property state, meaning that any property that is acquired by a couple during the course of their marriage is equally owned by both spouses. Community property laws require all marital property to be divided between the two parties, but not necessarily in a 50/50 split. Texas courts divide property based on what is believed to be “just and right.”

How are Community Property and Separate Property Different?

Community property is the only type of property divided during a Texas divorce. It is any property acquired by a couple during their marriage. It may include real estate, a business, cars, money, retirement accounts, furniture, or other things purchased by either party during the marriage.

Separate property is generally defined as:

  • Property owned or claimed by one party prior to marriage
  • The property acquired by one party during marriage by gift, devise, or descent
  • The recovery for personal injuries that were sustained by one party during the marriage, except any recovery pertaining to the loss of earning capacity during the marriage

Separate property is kept with the owner as long as they can show “clear and convincing evidence” that it has been kept separate from marital property.

How are Oil and Mineral Rights Determined?

Texas real estate is differentiated between surface rights and mineral rights. Surface rights involve control of the land and everything on it, such as permanent structures and the airspace located above the land. Mineral rights involve control of anything below the surface of the land, such as oil, minerals, water, and other resources. Typically, when real estate is purchased, both the surface and mineral rights are sold together unless the deed states otherwise.

When mineral rights are jointly owned by a couple, the rights will be considered community property and subject to equitable distribution after the rights are valued. When mineral rights are separate property, they generally remain the sole property of the same party following the divorce. Additionally, income earned from mineral rights by a sole party is still considered separate property because they are viewed the same as proceeds from the sale of the land.

How are Royalties and Bonus Payments Divided?

Most mineral rights holders enter into a lease agreement with a third-party energy company to access those minerals. The agreement grants access to the land and mine and permits drilling and collecting the resources in exchange for a periodic lease payment. These contracts typically contain stipulations regarding royalties and bonus payments.

In Texas, income earned from one spouse’s separate property during the marriage is still considered community property. Oil and gas royalties and bonus payments are an exception to this because courts have determined that these types of payments are still separate property and viewed as the spouse “selling” a part of the land. Because of this distinction, royalty, and bonus payments are not considered income from the land but payments for the sale of pieces of separate property.

When the rights are community property, then the rights are subject to equitable division.

How are Leases and Delay Rentals Divided?

Generally, these contracts also include delay rentals, which grant the third party the option to pay the owner a pre-determined amount to collect the resources at a later date. This is done so that the third party can begin work on the land at their convenience without fear of the owner leasing to a different party.

Texas courts have determined that these types of lease payments and delay rental payments are community property, even if the rights are considered to be separate property. These payments differ from royalties and bonus payments because they are solely based on the passage of time and not the extraction or sale of land.

How are Mineral Rights Valued?

When mineral rights are community property, they must be valued to be evenly split between the couple. Several factors can affect the value of mineral rights, such as the county of origin, the type of mineral, lease terms, and the current market for the mineral. A major determining factor is whether or not the mineral rights are producing or non-producing, as non-producing mineral rights generally have a lower value.

How are Mineral Rights Transferred After a Divorce?

Following a divorce, mineral rights can be redistributed based on what the couple has agreed to or on the court’s final decision. Mineral rights can be transferred by submitting the divorce decree and conveyances to the county where the minerals are located for recording. The county is then responsible for returning the recorded original documents to the new owner. If there are no producing wells on the land, then the transfer of ownership is complete.

Alternatively, if there is a producing well on the land, a copy of the recorded documents can be sent to the well’s operator. The operator will review the documents to check for accuracy, transfer ownership and submit new division orders. Payment for the minerals should begin shortly after the new division orders are reviewed and signed.

The general procedure for transfer is as follows:

  • Submit divorce decree and conveyances to the county to be recorded
  • Submit the recorded conveyance and divorce decree to the well operator working on the land
  • The operator will review the documents, transfer the ownership, and send out new division orders
  • Review and sign the division orders

Do I Need an Attorney?

If you are involved in a divorce with complex property entanglements and blurred lines of ownership, then you need legal representation who knows the law and is ready to fight for your rights. Call Morgan Bourque, Attorney at Law, today at 713-766-3733 or fill out a contact form for a free consultation.